Betfair, U.S. Horsemen Continue Talks

Betfair continues negotiating with U.S. horsemen on compensation for use of signals.

Betfair, the Great Britain-based online betting exchange, continues to negotiate with officials in the United States and is inching closer to a deal by which it would compensate horsemen for use of their product.

Betfair officials, who attended the National Horsemen’s Benevolent and Protective Association summer convention in Pennsylvania July 18-20, said the company doesn’t accept wagers from U.S. residents, but it takes bets on U.S. races from players in other countries, including Canada. Betfair officials have been in talks with the Thoroughbred Horsemen’s Group, which is attempting to increase purse revenue from pari-mutuel wagering.

“We’re actively negotiating with the THG,” said Christian Hellmers, a U.S. representative for Betfair. “We would hope to be able to reach an agreement soon. We’re focusing on the U.S. right now. We’re investing more resources. We’re in the fourth quarter of our negotiations with the THG.”

Betfair isn’t pari-mutuel. Players make bets against each other on various propositions, including horse racing. Some racing officials have expressed integrity concerns because with Betfair, a customer can play a horse to lose.

In 2007, Betfair produced turnover—handle—of $368 million on more than 40 sports. The company has worked out deals to compensate the horseracing industry in countries such as Great Britain, where it has been embraced.

Peter Probert, head of integrity for Betfair, said the company has a “Fraud Team” of 35 people in Australia, Great Britain, and Malta who monitor activities 24 hours a day, seven days a week. Betfair also has memorandums of understanding with 35 regulatory agencies, including the U.S.-based Thoroughbred Racing Protective Bureau.

Probert, who spent 18 years in the Royal Air Force intelligence branch, said Betfair shares information with the agencies and assists with any investigations. He said partners have access to real-time monitoring of betting activity.

Nick Coukos, executive director of the Ontario HBPA, said he uses Betfair but doesn’t play horses through its system because no money is returned to the Canadian racing industry. That, Coukos said, is a major stumbling block for the company.

“I think something finally needs to move forward before Betfair can be (embraced) in North America,” Coukos said. “Betfair has tremendous products, and our industry is starving for an alternative wagering platform. If you can get a deal done in Canada that works, it would be a huge step toward getting into (the U.S. market).”

Betfair officials said a proposal on the table would compensate the U.S. racing industry for wagers made on its races in other countries.

“We’ve been very forward with our approach,” Hellmers said.

“The company recognizes you guys put on the event,” Probert said. “The opportunity is there. It’s down to negotiations between the company and the authorities.”

THG president Bob Reeves said there has been “ongoing dialogue” with Betfair, but he stopped short of saying a deal is close.

“Our group hasn’t been together on it because there is a lack of understanding (of how Betfair operates),” Reeves said. “They are accepting wagers on horse racing from non-U.S. residents and not paying us anything for use of our product. I think the U.S. horseracing industry should sit down with them and work out a deal.”

If a deal is made, Betfair most likely would pay a flat fee to U.S. racing because its wagers aren’t made into pari-mutuel pools.

According to its annual report, Betfair on average process almost 5 million transactions per day, more than the European stock markets combined. In 2007, the company had 433,000 “active users” during the year, an increase of 57% from the previous year.

The only legal form of Internet wagering in the U.S. is pari-mutuel wagering on horse racing. Since passage of the Unlawful Internet Gambling Enforcement Act of 2006, federal investigators have gone after a few offshore bookmakers who took bets from U.S. residents.